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Practical manual for Income Tax 2021.

6.1 Tax regime for benefits received and early disposal of consolidated rights

a. Tax regime of benefits received

The benefits received for contingencies covered by pension plans (article 8.6 of the consolidated text of the Law regulating Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29) will be taxed in their entirety as work income without in any case being able to be reduced by the amounts corresponding to excess contributions.

With regard to the benefits received, take into account the possible application of the transitional regime of reductions applicable to benefits received in the form of capital from social security systems and arising from contingencies that occurred in the years 2012 or later, for the part corresponding to contributions made up to December 31, 2006, which is discussed in Chapter 3.

In the event that the benefit is received in the form of an insured life annuity, reversal mechanisms or certain benefit periods or counter-insurance formulas may be established in the event of death once the life annuity has been established.

Remember: In accordance with article 8.6 of the consolidated text of the Law regulating Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29, the contingencies for which benefits will be paid are:

  • Retirement.
  • Total and permanent incapacity for work in the usual profession or absolute and permanent incapacity for any work, and severe disability, determined in accordance with the corresponding Social Security Regime.
  • Death of the participant or beneficiary, which may generate the right to widowhood, orphanhood or benefits in favor of other heirs or designated persons.

  • Severe dependency or great dependency of the participant, regulated by Law 39/2006, of December 14, on the promotion of personal autonomy and care for people in situations of dependency.

b. Early disposition of consolidated rights

  • In general

    The vested rights of participants, members or insured persons in pension plans, insured pension plans, company social welfare plans and social welfare mutual funds may only be made effective in advance in the cases provided for in article 8.8 of the aforementioned consolidated text of the Law on the Regulation of Pension Plans and Funds approved by Royal Legislative Decree 1/2002, of 29 November, which are long-term unemployment, serious illness and from 2025 onwards for business contributions made at least 10 years ago.

    In the event that the participant, mutualist or insured person has, in whole or in part, the consolidated rights, as well as the economic rights derived from the social security systems, in cases other than those provided for in the regulations on pension plans and funds that we have indicated , he/she must replace the reductions in the tax base that were unduly made by means of the appropriate supplementary self-assessments, including late payment interest.

    These supplementary self-assessments must be submitted within the period between the date of the early withdrawal and the end of the regulatory period for submitting the declaration corresponding to the tax period in which the early withdrawal is made.

    In this case, the amounts received that exceed the amount of the contributions made, including, where applicable, the contributions imputed by the promoter, will be taxed as work income in the tax period in which they are received.

    Exceptionally

    However, in order to facilitate those affected by the volcanic eruption on the island of La Palma to meet the unforeseen liquidity needs, article 11 of Royal Decree-Law 20/2021, of October 5, which adopts urgent support measures for the repair of the damage caused by volcanic eruptions and for the economic and social reconstruction of the island of La Palma ( BOE of 6), has established in all these cases, on an exceptional basis and exclusively during the period between October 6, 2021 and July 5, 2022 , the possibility that participants in pension plans, as well as insured persons of insured pension plans and company social security plans and mutual members of social security mutual funds may dispose of their economic rights in advance in certain cases and by setting a maximum withdrawal amount.

    Conditions

    1. When they are owners of agricultural, forestry or livestock farms, commercial, industrial and service establishments, workplaces and similar, located within the geographical area of application of Royal Decree-Law 20/2021, of October 5, by which urgent support measures are adopted for the repair of damage caused by volcanic eruptions and for the economic and social reconstruction of the island of La Palma, and which have suffered damage as a direct consequence of the recorded volcanic eruption;

    2. When they are self-employed workers who are forced to suspend or cease their activity as a direct consequence of the recorded volcanic eruption;

    3. In the case of workers affected by temporary employment regulation files (ERTE) provided for in the fifth Additional Provision of Royal Decree-Law 18/2021, of September 28, on urgent measures for the protection of employment, economic recovery and the improvement of the labor market;

    4. In the event of loss of the habitual residence, when it is located within the geographical area of application of Royal Decree-Law 20/2021, of October 5, which adopts urgent support measures for the repair of damage caused by volcanic eruptions and for the economic and social reconstruction of the island of La Palma and has suffered damage as a direct consequence of the recorded volcanic eruption.

    Note: In the case of social security mutual funds that act as an alternative system to registration in the Special Social Security Regime for Self-Employed Workers, the economic rights of the products or insurance used to fulfill said alternative function cannot be made effective.

    Maximum withdrawal amount

    The maximum disposition limit per participant, insured or mutual member, for the set of pension plans, insured pension plans, company social pension plans and social pension mutual funds of which he/she is the holder and for all the situations indicated, will be the result of prorating the Public Indicator of Multiple Effects Income (IPREM) annually for 12 payments in force for the year 2021 (which amounts to 6,778.80 euros) multiplied by three for a maximum period of six months computed from October 6, 2021.

    Therefore, (6,778.80 euros x 3) ÷ 12 x 6 = 10,168.2

    Refund of consolidated rights 

    The reimbursement of vested rights will be subject to the tax regime established for pension plan benefits, that is, they are taxed as work income and are imputed to the year in which they are received.